By Marina Malenic
Seeking to trim costs under Defense Secretary Robert Gates’ efficiency initiative, the Missile Defense Agency is examining the possibility of opening tens of billions of dollars worth of contracts to industry competition.
While the agency has been relying heavily on sole-source contracts, Army Lt. Gen. Patrick O’Reilly, the agency’s chief, said he is looking at over $37 billion worth of contracts and plans to make changes, including changing cost-plus deals to fixed-price arrangements and opening up some of those to competition.
“One proven way of ensuring that we’re getting the greatest value for the dollar invested is competition,” O’Reilly told reporters at an Aug. 17 Defense Writers Group breakfast in Washington. “We will take aggressive steps on every procurement we possibly can in order to achieve a cost savings.”
Earlier this year, Gates began outlining his strategy to cut overhead and eliminate middle management positions throughout the department. During a speech at the Dwight D. Eisenhower Presidential Library in Abilene, Kan., in May, he said reforms were necessary to sustain a slower growth rate in the Pentagon’s overall budget (Defense Daily, May 11).
O’Reilly said his agency’s efforts to compete contract awards are “totally in line” with Gates’ plans.
For example, a follow-on $600 million competition for the Ground-Based Midcourse Defense (GMD) contract is forcing 10-year incumbent Boeing [BA] to battle against Lockheed Martin [LMT]. An MDA spokesman said the agency expects to make a decision next year.
O’Reilly also named the Standard Missile-3 Block IIB program and the Precision Tracking Space System (PTSS) satellite as additional programs soon to be up for competition.
Asked whether he had an estimate on what level of savings can be achieved via competitive contracts, the general said he has no specific cost goal.
“I’m not going to reach a limit and then say, ‘I’m stopping here’,” he explained. “The bottom line is, there’s a significant potential for savings from competition.”
The general also said his review will weigh adding “defect clauses” to contracts that run into technical difficulties to make manufacturers financially liable for problem hardware.
Pentagon officials have recently taken contractors to task for producing poor-quality missile-defense products. O’Reilly earlier this year decried lack of quality control on the part of industry and has withheld funding for several contracts (Defense Daily, March 23). For example, the agency halted work for a time with Coleman Aerospace after one of that company’s target missiles malfunctioned and fell into the Pacific Ocean last December during a failed THAAD test (Defense Daily, June 10).
O’Reilly said this week that Lockheed Martin will be responsible for any cost increases related to production delays involving interceptors for its Terminal High Altitude Area Defense (THAAD) system (Defense Daily, Aug. 18). Delays related to problems with a fail-safe switch produced by subcontractor Moog [MOG.A] have placed interceptor deliveries to the Army approximately six months behind schedule.
THAAD, along with the Navy’s sea-based SM-3 interceptors on Aegis-class destroyers and cruisers, is at the core of the new regional missile defenses that the Obama administration plans to deploy in the Middle East.
Meanwhile, a test of the agency’s experimental Airborne Laser (ABL) planned for Aug. 17 has been delayed, officials said yesterday. A problem with a tracking camera’s cooling system was cited as the reason for the decision to postpone the test.
O’Reilly had said on Aug. 17 that the exercise had already been postponed twice due to “minor” technical difficulties. He said that a successful initial test in February demonstrated the laser-plane’s ability to shoot down a mock ballistic missile more than 50 miles away and that the forthcoming test would seek to double that range (Defense Daily, Aug. 18).